Time for driver-based car insurance pricing

In a latest study by Policybazaar.com, Telangana loss ratio (LR) on motor insurance at 56 per cent is 20 per cent below the national industry average of 76 per cent making it one of the most profitable markets for car insurers in the country.

By Author  |  Published: 13th May 2018  12:05 amUpdated: 13th May 2018  1:16 am
car insurance
Though Telangana currently contributes to 3.2 per cent of the car insurance market, it has been growing at a rate of 50 per cent in the last two years.

Hyderabad: The motor portfolio is the largest segment for most general insurers in the market today. Hence the profitability of this book has an immense importance. The outcome is heavily influenced by loss ratio of the portfolio and is a direct outcome of the pricing and underwriting strategies rolled out by the insurer.

In a latest study by Policybazaar.com, Telangana loss ratio (LR) on motor insurance at 56 per cent is 20 per cent below the national industry average of 76 per cent making it one of the most profitable markets for car insurers in the country. LR refers to the total claims paid to consumers against total premium collected.

Policybazaar said, “The majority of our customers in Telangana are in the age bracket of 28-45 years. The growth of 50 per cent in Telangana market is in line with the overall national growth rate. Out of 3 lakh customer base, Telangana’s share is 3.2 per cent, and has been growing at a rate of 50 per cent rate, since 2016.”

In a report focusing on the behaviour of digital car insurance customers in India, compiled by Policybazaar.com’s Product & Innovation Centre, the online company analysed the behaviour of almost 3 lakh digital consumers across the country, and review informed discussion on how car insurance premium is priced in India. It analyses the behaviour of car insurance consumer on digital channel on parameters such as claims segmentation by geography, car brand, no claims bonus (NCB), fuel type, and vehicle age and car type.

Sajja Praveen Chowdary, head, Motor Insurance, Policybazaar.com told Telangana Today, “In India, car insurance policies are priced according to the vehicles and not drivers, resulting into unanimous pricing for both good and bad drivers. Through our report, we aim to provide strategic and profitable solutions to our insurance partners, aim at bringing change in the current pricing structure of motor insurance in India.”

He further added that there is a need to bring behaviour-based pricing structure where digital and good customers can be priced differently.

Policybazaar.com report states that people who renew their car insurance at least four days prior to expiry are less likely to file a claim for damages over those who do it at a later stage. Similarly, consumers driving petrol cars are less likely to claim insurance in comparison to those who are using diesel or CNG vehicles.

Market share of South India (including Telangana, Andhra Pradesh, Karnataka Tamil Nadu and Kerala) is 19.5 per cent for online car insurance in India.

Policybazaar says, “Against the apprehensions across different segments in the market, digital car insurance sale in India is viable. There exists significant opportunity for growth and equally large sections of profitability if one were to apply the right set of analytics and segmentation. But perhaps the greatest benefit of the digital channel is the ability to individually and separately underwrite every risk that comes on board. The capability to personalise pricing helps in applying the observed trends to specific customer segments, far more easily. The segmentation can therefore be extended to multiple dimensions, eventually resulting in a technical pricing model for all cars and car owners across the market.”